Tuesday, 3 November 2015

Run off insurance

Run-off insurance is a type of insurance that
protects against future loss. A run off insurance is required because under a "claims made" basis, insurance does
not cover a business after the policy expires,
this puts the business in a precarious position if claims are
made after the expiration date of the policy.

This type of insurance
is required because professional
indemnity insurance is provided on a ‘claims made’ basis which means that it is
the policy in place at the time that you become aware of the claim that
provides the cover and not the policy that was in place at the time the work
was undertaken.

Run-off
insurance is usually provided by insurance companies that provided cover prior
to closure. New insurers are reluctant
to provide a run-off policy for a company which they have not insured prior to
closure. Though it is difficult to predict the closure of a business, companies
should try and remain with the same insurer two to three years ahead of closure
because this will help to get the policy at competitive rates from the same
insurer.

The provisions
of a run-off policy look identical to extended reporting period (ERP)
provisions, there are differences, while ERPs are written for only one year
while run-off policies can have a tenure as long as five years. Second, ERPs
are mostly purchased when an insured changes from one claims-made insurer to
another, runoff provisions are generally used when one insured company is
involved in an acquisition or merger with another company. In such cases, the
acquired company buys a runoff provision that covers claims associated with
wrongful acts that took place prior to the acquisition but are made against the
acquired company after it has been acquired.

In case a company is sold and the liabilities are taken care of by the
acquiring company then there might be no need to purchase a run-off policy.

Run-off insurance is
purchased by individual professionals to protect themselves from professional
liabilities after they have ceased to be in service or have closed their business. For instance a financial consultant may need
to buy such a policy to protect him from charges of negligence, errors and
omissions from clients he had served prior to his retirement.

A ‘run-off’ cover
protects a company or professional from any claims made once the protection offered
by a professional indemnity expires.

To know more about getting the right run-off insurance policy based on your needs and an unbiased opinion on the best options
please visit www.zenisure.com or call us
on +91 9848884363